Residence & Domicile

Leaving or returning to the UK? Split your time between the UK and overseas?

Then it may be necessary to consider your residence status for UK tax purposes. As a general rule, UK residents are charged to UK tax on their worldwide income while non-UK residents are charged to UK tax on UK-source income only.

It is therefore crucial that your residence status is correctly determined as it may have a significant impact on your liability to UK tax. PD Tax have assisted many clients with various residence issues which have affected their UK tax bill and helped them identify areas where they can plan for UK tax efficiently.

Further complexities can arise where you are UK resident but domiciled elsewhere, and wish to claim the remittance basis.

PD Tax are experienced in advising both those coming to and those moving away from the UK as well as those with domiciled outside the UK.

The clients were both born in the UK with British citizenship and emigrated to Australia where they lived and worked for over 30 years.

Following retirement, the clients purchased a property in England with the intention of spending up to 5 months a year in the UK and the remainder of the year in Australia.

They were worried that due to the recent introduction of the Statutory Residence Test (STR) they may be considered UK residents, making them subject to tax on their worldwide income including Australian pensions and bank interest.

The Solution

Following an initial meeting, we provided detailed written advice which set out the key principals in relation to their residence status including the impact of the UK-Australia double tax treaty.

Due to the number of days they expect to spend in the UK, we advised that strictly they would be UK resident under the SRT.

However, we were further able to advise that the UK-Australia double tax treaty had a tiebreaker clause for dual residents, which in their circumstances would award residence to Australia.

The Result

Both clients are non-UK resident therefore their Australian income is outside the scope of UK income tax.

Their residence position and double tax treaty exemptions will need to be carefully documented on their UK tax returns going forwards.